PROSPECTUS
& APPLICATION
LOGO
TEMPLETON GLOBAL
SMALLER COMPANIES
FUND, INC.
--------------------------------------------------
JANUARY 1, 1997
INVESTMENT STRATEGY
GLOBAL GROWTH
LOGO
- --------------------------------------------------------------------------------
This prospectus describes the Advisor Class shares of Templeton Global
Smaller Companies Fund, Inc. (the "Fund"). It contains information you
should know before investing in the Fund. Please keep it for future
reference.
The Fund's SAI for the Advisor Class, dated January 1, 1997, as may be
amended from time to time, includes more information about the Fund's
procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a
larger print version of this prospectus, call 1-800/DIAL BEN or write the
Fund at the address shown.
Advisor Class shares are only available for purchase by certain persons,
including, among others, certain financial institutions (such as banks,
trust companies, savings institutions and credit unions); government and
tax-exempt entities; certain pension, profit sharing and employee benefit
plans; certain qualified groups, including family trusts, endowments,
foundations and corporations; Franklin Templeton Fund Allocator Series;
and directors, trustees, officers and full time employees (and their
family members) of Franklin Templeton Group and the Franklin Templeton
Group of Funds. See "About Your Account."
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY OF THE U.S. GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PAGE
TEMPLETON GLOBAL SMALLER
COMPANIES FUND, INC.
- --------------------------------------------------------------------------------
This prospectus is not an offering of the securities herein
described in any state in which the offering is not authorized.
No sales representative, dealer, or other person is
authorized to give any information or make any representations
other than those contained in this prospectus. Further
information may be obtained from Distributors.
----------------------------------------------------------
When reading this prospectus, you will see
certain terms beginning with capital letters.
This means the term is explained
in our glossary section.
PAGE
<TABLE>
<S> <C> <C>
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary ........................ 2
How Does the Fund Invest Its
Assets? ................................. 3
What Are the Fund's Potential
Risks? .................................. 4
Who Manages the
Fund? ................................... 8
How Does the Fund Measure
Performance? ........................... 9
How Is the Fund
Organized? ............................. 10
How Taxation Affects You and the
Fund .................................... 11
ABOUT YOUR ACCOUNT
How Do I Buy
Shares? ................................. 12
May I Exchange Shares for Shares of
TEMPLETON Another Fund? ........................... 14
GLOBAL How Do I Sell
SMALLER Shares? ................................ 17
COMPANIES What Distributions Might I Receive
FUND, INC. from the Fund? .......................... 18
- ------------------------ Transaction Procedures and Special
January 1, 1997 Requirements ............................ 19
Services to Help You Manage Your
700 Central Avenue Account ................................. 24
St. Petersburg, Florida GLOSSARY
33701 Useful Terms and
1-800/DIAL BEN Definitions ............................. 27
</TABLE>
PAGE
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Advisor Class shares of the Fund. Because Advisor Class shares were not offered
to the public prior to January 1, 1997, the table is based on the historical
expenses of the Class I shares of the Fund for the fiscal year ended August 31,
1996.(+) Your actual expenses may vary.
<TABLE>
<S> <C> <C>
A. Shareholder Transaction Expenses(++)
Maximum Sales Charge Imposed on Purchases NONE
Exchange Fee (per transaction) $5.00(+++)
B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.75%
Rule 12b-1 Fees NONE
Other Expenses (audit, legal, business
management, transfer agent and custodian) 0.32%
-----
Total Fund Operating Expenses 1.07%
-----
C. Example
</TABLE>
Assume the annual return for Advisor Class shares is 5% and its operating
expenses are as described above. For each $1,000 investment, you would pay
the following projected expenses if you sold your shares after the number of
years shown.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
------------------------------------------------------
<S> <C> <C> <C> <C>
$ 11 $34 $59 $131
</TABLE>
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or the dividends paid on Advisor Class
shares and are not directly charged to your account.
(+)Unlike Advisor Class shares, the Class I shares of the Fund have a front-end
sales charge and Rule 12b-1 fees.
(++)If your transaction is processed through your Securities Dealer you may be
charged a fee by your Securities Dealer for this service.
(+++)$5.00 fee is only for Market Timers. We process all other exchanges
without a fee.
2 o Templeton Global Smaller Companies Fund, Inc.
PAGE
HOW DOES THE FUND INVEST ITS ASSETS?
The Fund's Investment Objective
The Fund's investment objective is long-term capital growth, which it seeks to
achieve by investing in common stocks and all types of common stock
equivalents, including rights, warrants and preferred stock, of companies of
various nations throughout the world. The Fund seeks to achieve its objective by
investing primarily in securities of smaller companies globally. The objective
is a fundamental policy of the Fund and may not be changed without shareholder
approval. Of course, there is no assurance that the Fund's objective will be
achieved.
The Fund's investment policy is based on the belief that in today's world,
investment opportunities change rapidly, not only from company to company and
from industry to industry, but also from one national economy to another.
Accordingly, the Fund seeks investment opportunities in all types of securities
issued by companies or governments of any nation, both developed and
underdeveloped. Under normal circumstances, the Fund will invest at least 65%
of its total assets in issuers domiciled in at least three different nations,
one of which may be the U.S.
Consistent with its investment objective, the Fund expects to invest 75% of its
portfolio in issuers whose individual market capitalizations would place them
(at the time of purchase) in the same size range as companies in approximately
the lowest 20% by total market capitalization of companies that have equity
securities listed on a U.S. national securities exchange or traded in the NASDAQ
system. Based on recent U.S. share prices, these companies typically have
individual market capitalizations of between approximately $50 million and $1
billion. Because the Fund is permitted to apply the U.S. size standard on a
global basis, it may invest in issuers that might rank above the lowest 20% by
total market capitalization in local markets and, in fact, might in some
countries rank among the largest companies in terms of capitalization. The
Board has adopted an operating policy under which the Fund will not purchase
securities of companies with individual market capitalizations of greater than
$1 billion.
Whenever, in the judgment of TICI, market or economic conditions warrant, the
Fund may, for temporary defensive purposes, invest in (i) bonds and other debt
obligations of companies of various nations throughout the world, (ii) debt
obligations of the U.S. government or its political subdivisions, (iii) debt
obligations of other governments, (iv) short-term time deposits with banks
(maturities of 60 days or less), (v) certain repurchase agreements (U.S.
government obligations with a simultaneous agreement with the seller to
Templeton Global Smaller Companies Fund, Inc. o 3
PAGE
repurchase them within no more than seven days at the original purchase price
plus accrued interest), and (vi) commercial paper. Certain of these debt
obligations may consist of high-risk, lower quality debt securities. (See "What
Are the Fund's Potential Risks?")
The Fund may purchase sponsored or unsponsored American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs") (collectively, "depositary receipts"). The Fund may invest no more
than 5% of its total assets in securities issued by any one company or
government, exclusive of U.S. government securities. Although the Fund may
invest up to 25% of its assets in a single industry, there is no present
intention of doing so. The Fund may borrow money as a temporary measure up to an
amount not exceeding 5% of the value of its total assets, invest up to 5% of its
total assets in warrants and invest up to 10% of its total assets in restricted
securities, securities with a limited trading market and securities which are
not otherwise readily marketable.
The Fund invests for long-term growth of capital and does not emphasize short-
term trading profits. Accordingly, the Fund expects to have a portfolio turnover
rate of less than 50%.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund, nor can there
be any assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of, and income from, an investment in
the Fund can decrease as well as increase, depending on a variety of factors
which may affect the values and income generated by the Fund's portfolio
securities, including general economic conditions and market factors. In
addition to the factors which affect the value of individual securities, a
shareholder may anticipate that the value of the shares of the Fund will
fluctuate with movements in the broader equity and bond markets. A decline in
the stock market of any country in which the Fund is invested may also be
reflected in declines in the price of shares of the Fund. Changes in currency
valuations will also affect the price of shares of the Fund. History reflects
both decreases and increases in worldwide stock markets and currency
valuations, and these may occur unpredictably in the future. The value of debt
securities held by the Fund generally will vary inversely with changes in
prevailing interest rates. Additionally, investment decisions made by TICI will
not always be profitable or prove to have been correct. The Fund is not
intended as a complete investment program.
4 o Templeton Global Smaller Companies Fund, Inc.
PAGE
The Fund expects to invest 75% of its assets in issuers whose individual market
capitalizations would place them (at the time of purchase) in the same size
range as companies in approximately the lowest 20% by total market
capitalization of companies that have equity securities listed on a U.S.
national securities exchange or traded in the NASDAQ system. While the
companies in which the Fund primarily invests may offer greater opportunities
for capital appreciation than larger, more established companies, investments
in smaller, emerging growth companies may involve greater risks and thus may be
considered speculative. For example, small companies may have limited product
lines, markets or financial and management resources. In addition, many small
emerging growth company stocks trade less frequently and in smaller volume, and
may be subject to more abrupt or erratic price movements, than stocks of large
companies. The securities of small emerging growth companies may also be more
sensitive to market changes than the securities of large companies.
The Fund has the right to purchase securities in any foreign country, developed
or developing. Investors should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), foreign investment controls on daily stock market movements,
default in foreign government securities, political or social instability, or
diplomatic developments which could affect investments in securities of issuers
in foreign nations. Some countries may withhold portions of interest and
dividends at the source. In addition, in many countries there is less publicly
available information about issuers than is available in reports about
companies in the U.S. Foreign companies are not generally subject to uniform
accounting or financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to U.S. companies. The
Fund may encounter difficulties or be unable to vote proxies, exercise
shareholder rights, pursue legal remedies, and obtain judgments in foreign
courts.
Brokerage commissions, custodial services, and other costs relating to
investments in foreign countries are generally more expensive than in the U.S.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary
Templeton Global Smaller Companies Fund, Inc. o 5
PAGE
periods when assets of the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. In addition, the foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid, and subject to greater price volatility than
those in the U.S. The Fund may invest in Eastern European countries, which
involves special risks that are described under "What Are the Fund's Potential
Risks?" in the SAI.
Prior governmental approval of non-domestic investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitation also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations. Repatriation of
investment income, capital and proceeds of sales by foreign investors may
require governmental registration and/or approval in some developing countries.
The Fund could be adversely affected by delays in or a refusal to grant any
required governmental registration or approval for such repatriation.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
As a non-fundamental policy, the Fund will limit its investments in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration
6 o Templeton Global Smaller Companies Fund, Inc.
PAGE
and custody. For more information on these risks and other risks associated with
Russian securities, please see "What Are the Fund's Potential Risks?" in the
SAI.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. In addition, the
issuers of the securities underlying unsponsored depositary receipts are not
obligated to disclose material information in the U.S. and, therefore, there may
be less information available regarding such issuers and there may not be a
correlation between such information and the market value of the depositary
receipts. Depositary receipts also involve the risks of other investments in
foreign securities, as discussed above.
The Fund is authorized to invest in medium quality or high risk, lower quality
debt securities (which may include structured investments, as described in the
SAI under "How Does the Fund Invest Its Assets? - Structured Investments"). As
an operating policy, which may be changed by the Board without shareholder
approval, the Fund will not invest more than 5% of its total assets in debt
securities rated lower than BBB by S&P or Baa by Moody's or, if unrated, of
equivalent investment quality as determined by TICI. The Board may consider a
change in this operating policy if, in its judgment, economic conditions change
such that a higher level of investment in high-risk, lower quality debt
securities would be consistent with the interests of the Fund and its
shareholders. See "How Does the Fund Invest Its Assets? - Debt Securities" in
the SAI for descriptions of debt securities rated BBB by S&P and Baa by
Moody's. High-risk, lower quality debt securities, commonly known as "junk
bonds," are regarded, on balance, as predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligation and may be in default. Unrated debt securities are
not necessarily of lower quality than rated securities but they may not be
attractive to as many buyers. Regardless of rating levels, all debt securities
considered for purchase (whether rated or unrated) will be carefully analyzed
by TICI in an attempt to insure, to the extent possible, that the planned
investment is sound. The Fund may, from time to time, purchase defaulted debt
securities if, in the opinion of TICI, the issuer may resume interest payments
in the near future. The Fund will not invest more than 10% of its total assets
in defaulted debt securities, which may be illiquid.
The Fund usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. However, some
price spread on currency exchange (to cover service charges) will be incurred
when the Fund converts assets from one currency to another. There are further
Templeton Global Smaller Companies Fund, Inc. o 7
PAGE
risk considerations, including possible losses through the holding of
securities in domestic and foreign custodian banks and depositories, described
in the SAI.
WHO MANAGES THE FUND?
The Board. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure that no material conflicts exist among
the classes of shares. While none is expected, the Board will act appropriately
to resolve any material conflict that may arise.
Investment Manager. TICI manages the Fund's assets and makes the Fund's
investment decisions. TICI also performs similar services for other funds. TICI
is wholly owned by Resources, a publicly owned company engaged in the financial
services industry through its subsidiaries. Charles B. Johnson and Rupert H.
Johnson, Jr. are the principal shareholders of Resources. Together, TICI and its
affiliates manage over $172 billion in assets. The Templeton organization has
been investing globally since 1940. TICI and its affiliates have offices in
Argentina, Australia, Bahamas, Canada, France, Germany, Hong Kong, India,
Italy, Luxembourg, Poland, Russia, Scotland, Singapore, South Africa, U.S., and
Vietnam. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the Fund's Code of Ethics.
Portfolio Management. The lead portfolio manager of the Fund since 1995 is Marc
S. Joseph. Mr. Joseph is a senior vice president of TICI. He holds a BS in
computer science from William & Mary, an MBA from Harvard Business School and a
JD from Harvard Law School. Before joining the Templeton organization, Mr.
Joseph worked as a management consultant with McKinsey & Company and as a vice
president with Pacific Financial Research. Mr. Joseph currently manages several
funds, leads Templeton's small cap research team and has global research
responsibilities for the building materials industry.
Mark R. Beveridge and Gary R. Clemons exercise secondary portfolio management
responsibilities for the Fund. Mr. Beveridge is a senior vice president of
TICI. He holds a BBA in finance from the University of Miami. Mr. Beveridge is
a Chartered Financial Analyst, a Chartered Investment Counselor, and a member
of the South Florida Society of Financial Analysts and the International Society
of Financial Analysts. Before joining the Templeton organization in 1985 as a
securities analyst, Mr. Beveridge was a principal with a financial accounting
software firm based in Miami, Florida. He is currently a portfolio manager and
analyst with research responsibilities for the country of Argentina and the
following industries: appliances, household durables, waste management, indus-
8 o Templeton Global Smaller Companies Fund, Inc.
PAGE
trial components and business and public services. Mr. Clemons is a senior vice
president of TICI. He holds a BS in geology from the University of Nevada -
Reno and an MBA with emphases in finance and investment banking from the
University of Wisconsin - Madison. He joined TICI in 1993. Prior to that time
he was a research analyst at Templeton Quantitative Advisors, Inc. in New York,
where he was also responsible for management of a small capitalization fund. Mr.
Clemons' current research responsibilities include the telecommunications
industries and country coverage of Columbia, Peru, Sweden and Norway.
Management Fees. For the fiscal year ended August 31, 1996, the Fund paid 0.75%
of its average daily net assets in management fees.
Portfolio Transactions. TICI tries to obtain the best execution on all
transactions. If TICI believes more than one broker or dealer can provide the
best execution, consistent with internal policies it may consider research and
related services and the sale of Fund shares, as well as shares of other funds
in the Franklin Templeton Group of Funds, when selecting a broker or dealer.
Please see "How Does the Fund Buy Securities For its Portfolio?" in the SAI for
more information.
Administrative Services. FT Services (and, prior to October 1, 1996, Templeton
Global Investors, Inc.) provides certain administrative services and facilities
for the Fund. During the fiscal year ended August 31, 1996, administration fees
totaling 0.11% of the average daily net assets of the Fund were paid to
Templeton Global Investors, Inc. Please see "Investment Management and Other
Services" in the SAI for more information.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measure of performance is total return. Performance figures are
usually calculated using the maximum sales charge, if applicable. Certain
performance figures may not include any applicable sales charge or Rule 12b-1
fees.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested.
The Fund's investment results will vary. Performance figures are always based on
past performance and do not guarantee future results. For a more detailed
description of how the Fund calculates its performance figures, please see "How
Does the Fund Measure Performance?" in the SAI.
Templeton Global Smaller Companies Fund, Inc. o 9
PAGE
HOW IS THE FUND ORGANIZED?
The Fund is a diversified, open-end management investment company, commonly
called a mutual fund. It was organized as a Maryland corporation on February 4,
1981, and is registered with the SEC under the 1940 Act. Prior to May 15, 1996,
the Fund's name was Templeton Smaller Companies Growth Fund, Inc.
The Fund began offering two classes of shares on May 1, 1995: Templeton Global
Smaller Companies Fund, Inc. - Class I and Templeton Global Smaller Companies
Fund, Inc. - Class II. All shares purchased before that time are considered
Class I shares. The Fund began offering a third class of shares on January 1,
1997: Templeton Global Smaller Companies Fund, Inc. - Advisor Class. Class I,
Class II and Advisor Class shares differ as to sales charges, expenses and
services. Different fees and expenses will affect performance. Additional
classes may be offered in the future. A further description of Class I and Class
II is set forth below.
Each class will vote separately on matters (1) affecting only that class, (2)
expressly required to be voted on separately by state law, or (3) required to
be voted on separately by the 1940 Act. Shares of each class represent
proportionate interests in the assets of the Fund and have the same voting and
other rights and preferences as any other class of the Fund on matters that
affect the Fund as a whole.
Class I and Class II. Class I and Class II shares of the Fund are described in a
separate prospectus relating only to those classes. You may buy Class I and
Class II shares through your investment representative or directly by contacting
the Fund. If you would like a prospectus relating to the Fund's Class I and
Class II shares, contact your investment representative or Distributors.
Class I and Class II shares of the Fund have sales charges and Rule 12b-1
charges that may affect performance. Class I shares have a front-end sales
charge of 5.75% (6.10% of the net amount invested) which is reduced on certain
transactions of $50,000 or more. Class I shares are subject to Rule 12b-1
expenses up to a maximum of 0.25% per year of Class I's average daily net
assets. Class II shares have a front-end sales charge of 1.00% (1.01% of the net
amount invested), and are subject to Rule 12b-1 expenses up to a maximum of
1.00% per year of Class II's average daily net assets. Shares of Class I may be
subject to, and shares of Class II are generally subject to, a Contingent
Deferred Sales Charge upon redemption.
The Fund has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this
10 o Templeton Global Smaller Companies Fund, Inc.
PAGE
happens, holders of the remaining shares voting will not be able to elect anyone
to the Board.
The Fund does not intend to hold annual shareholder meetings. It may hold a
special meeting, however, for matters requiring shareholder approval under the
1940 Act. The Fund will call a special meeting of shareholders for the purpose
of considering the removal of a Board member if requested in writing to do so
by shareholders holding at least 10% of the outstanding shares. The 1940 Act
requires that we help you communicate with other shareholders in connection
with removing members of the Board.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to Federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund intends to
distribute to shareholders substantially all of its net investment income and
net realized capital gains, which generally will be taxable income or capital
gains in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31
in the year such distributions were declared. The Fund will inform you each year
of the amount and nature of such income or gains. Sales or other dispositions of
Fund shares generally will give rise to taxable gain or loss.
Templeton Global Smaller Companies Fund, Inc. o 11
PAGE
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
Opening Your Account
You may buy Advisor Class shares if you are making a minimum initial investment
of $5 million (in the aggregate) in one or more Advisor Class shares of the
Franklin Templeton Funds ($25 for subsequent investments) or if you are an
investor in one of the following categories:
(a) Broker-dealers, qualified registered investment advisors or certified
financial planners, who have entered into a supplemental agreement with
Distributors for clients participating in comprehensive fee programs;
(b) Qualified registered investment advisors or registered certified financial
planners who have clients invested in Mutual Series on October 31, 1996;
(c) Qualified registered investment advisors or registered certified financial
planners who did not have clients invested in Mutual Series on October 31, 1996
may buy through a broker-dealer or service agent who has entered into an
agreement with Distributors;
(d) Employer stock, bonus, pension or profit-sharing plans that meet the
requirements for qualification under Section 401 of the Code, including salary
reduction plans qualified under Section 401(k) of the Code, if the number of
employees is 5,000 or more or the plan has assets of $50 million or more;
(e) Effective on or about February 1, 1997, participants in Franklin Templeton's
401(k) and any Franklin Templeton Group Company Profit Sharing Plans;
(f) Trust companies and bank trust departments initially investing in any of the
Franklin Templeton Funds at least $1 million of assets held in a fiduciary,
agency, advisory, custodial or similar capacity and over which the trust
companies, bank trust departments or other plan fiduciaries or participants, in
the case of certain retirement plans, have full or shared investment discretion;
(g) Governments, municipalities and tax-exempt entities that meet the
requirements for qualification under Section 501 of the Code (subject to an
initial investment in Advisor Class shares of $1 million);
(h) Any other investor, including a private investment vehicle such as a family
trust or foundation, who is a member of a qualified group may also purchase
Advisor Class shares of the Fund if the group as a whole meets the required
minimum initial investment of $5 million;
12 o Templeton Global Smaller Companies Fund, Inc.
PAGE
(i) Directors, trustees, officers and full-time employees (and members of their
immediate family) of Franklin Templeton Group and Franklin Templeton Group of
Funds who invest $100 or more;
(j) Accounts managed by the Franklin Templeton Group; and
(k) Class I shareholders of teh Fund who qualify under one of the above
cateoreis, may have their existing Class I shares invested into the Fund's
Advisor Class by sending written instructions should be addressed to Investor
Services. Generally,for federal incoe tax purposes, ther will be no
recognition of gain or loss associated with such a transaction. You may wish
to consult with your tax advisor to determine whether tere are any state income
tax consequences to such a transaction.
(l) Each series of Franklin Templeton Fund Allocator Series that invests $1,000
or more.
The qualified group referred to in Item (h) above, is one that:
o Was formed at least six months ago,
o Has a purpose other than buying Fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
If you are subject to the $5 million minimum investment requirement, the cost
or current value (whichever is higher) of your investment in other funds in the
Franklin Templeton Funds will be included for purposes of determining
compliance with the required minimum investment amount, provided that at least
$1 million is invested in Advisor Class shares of the Franklin Templeton Funds.
Templeton Global Smaller Companies Fund, Inc. o 13
PAGE
The minimum for subsequent investments in Advisor Class shares is $25 for most
purchases of Advisor Class shares of the Fund and for purchases by directors,
trustees, officers and full-time employees (and members of their immediate
family) of Franklin Templeton Group and Franklin Templeton Funds; and $1,000
for each series of Franklin Templeton Fund Allocator Series.
Purchase Price of Fund Shares
Advisor Class shares are purchased at Net Asset Value without a sales charge.
Securities Dealers may receive compensation up to 0.25% of the amount invested
from Distributors or an affiliated company.
How Do I Buy Shares in Connection with Retirement Plans?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, please call our Retirement Plans Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Advisor Class shares.
14 o Templeton Global Smaller Companies Fund, Inc.
PAGE
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates for
the shares you're exchanging
- --------------------------------------------------------------------------
BY PHONE Call Shareholder Services
(If you do not want the ability to exchange by
phone to apply to your account, please let us
know.)
- --------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
How We Process Your Exchange
If you are exchanging your Advisor Class shares of the Fund you may:
o exchange into any of our money funds except Franklin Templeton Money Fund II.
o exchange into the other Advisor Class shares of the Franklin Templeton Funds
(excluding Templeton Developing Markets Trust, Templeton Foreign Fund and
Templeton Growth Fund, Inc., except as described below), Mutual Series Class
Z shares and Templeton Institutional Funds, Inc., if you meet the investment
requirements of the fund to be acquired.
o exchange into the Advisor Class shares of Templeton Developing Markets Trust,
Templeton Foreign Fund and Templeton Growth Fund, Inc. only if you fall into
one of the following categories: (i) you are a broker-dealer or a qualified
registered investment advisor who has entered into a special agreement with
Distributors for your clients who are participating in comprehensive fee
programs; (ii) you are a qualified registered investment advisor or registered
certified financial planner who has clients invested in Mutual Series on
October 31, 1996; (iii) you are a qualified registered investment advisor or
registered certified financial planner who did not have clients invested in
Mutual Series on October 31, 1996 and are buying through a broker-dealer or
service agent who has entered into an agreement with Distributors; (iv) you
are a director, trustee, officer or full-time employee (or a family member)
of the Franklin Templeton Group or the Franklin Templeton Funds; (v) you are a
participant in Franklin Templeton's 401(k) Plan or Franklin Templeton's Profit
Sharing Plan; (vi) the exchanging shareholder is an account managed by the
Templeton Global Smaller Companies Fund, Inc. o 15
PAGE
Franklin Templeton Group; or (vii) the exchanging shareholder is a series of
the Franklin Templeton Fund Allocator Series.
o if the fund you are exchanging into does not offer Advisor Class shares, you
may exchange into the Class I shares of the fund at Net Asset Value.
Please be aware that the following restrictions may apply to exchanges:
o The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy upon 60 days' written notice.
o Your exchange may be restricted or refused if you: (i) request an exchange out
of the Fund within two weeks of an earlier exchange request, (ii) exchange
shares out of the Fund more than twice in a calendar quarter, or (iii)
exchange shares equal to at least $5 million, or more than 1% of the
Fund's net assets. Shares under common ownership or control are combined for
these limits. If you exchange shares as described in this paragraph, you will
be considered a Market Timer. Each exchange by a Market Timer, if accepted,
will be charged $5.00. Some of our funds do not allow investments by Market
Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
16 o Templeton Global Smaller Companies Fund, Inc.
PAGE
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
additional requirements.
- ----------------------------------------------------------------------
BY PHONE
(Only available if you have completed and sent to us the telephone
redemption agreement included with this prospectus)
Telephone requests will be accepted:
o If the request is $50,000 or less.
Institutional accounts may exceed $50,000 by
completing a separate agreement. Call
Institutional Services to receive a copy.
o If there are no share certificates issued
for the shares you want to sell or you have
already returned them to the Fund
o Unless you are selling shares in a Trust
Company retirement plan account
o Unless the address on your account was
changed by phone within the last 30 days
Beginning on or about May 1, 1997, you will
automatically be able to redeem shares by
telephone without completing a telephone
redemption agreement. Please notify us if you
do not want this option to be available on
your account. If you later decide you would
like this option, send us written instructions
signed by all account owners.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ----------------------------------------------------------------------
</TABLE>
Templeton Global Smaller Companies Fund, Inc. o 17
PAGE
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
Trust Company Retirement Plan Accounts
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
Dividends and capital gains are calculated and distributed the same way for each
class of the Fund. The amount of any income dividends per share will differ,
however, generally due to the difference in the applicable Rule 12b-1 fees of
any class. Advisor Class shares are not subject to Rule 12b-1 fees.
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.
18 o Templeton Global Smaller Companies Fund, Inc.
PAGE
Distribution Options
You may receive your distributions from the Fund in any of these ways:
1. Buy additional shares of the Fund - You may buy additional shares of the same
class of the Fund by reinvesting capital gain distributions, dividend
distributions, or both. This is a convenient way to accumulate additional
shares and maintain or increase your earnings base.
2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy Advisor Class shares or Class I shares of another Franklin
Templeton Fund. Many shareholders find this a convenient way to diversify their
investments.
3. Receive distributions in cash - You may receive capital gains distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE THE SHAREHOLDER APPLICATION
INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT REPRESENTATIVE WHICH
OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL AUTOMATICALLY
REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE ADVISOR CLASS SHARES OF
THE FUND. For Trust Company retirement plans, special forms are required to
receive distributions in cash. You may change your distribution option at any
time by notifying us by mail or phone. Please allow at least seven days prior to
the record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
How and When Shares Are Priced
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share as of the scheduled close of the NYSE, generally 4:00
p.m. Eastern time. You can find the prior day's closing Net Asset Value and
Offering Price of the Fund in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
Templeton Global Smaller Companies Fund, Inc. o 19
PAGE
The Price We Use When You Buy or Sell Shares
You buy shares of Advisor Class at the Net Asset Value per share. We calculate
it to two decimal places using standard rounding criteria. You also sell shares
at Net Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest
between the time we receive the order from your dealer and the time we receive
any required documents.
Proper Form
An order to buy shares is in proper form when we receive your signed
shareholder application and check. Written requests to sell or exchange shares
are in proper form when we receive written instructions signed by all registered
owners, with a signature guarantee if necessary. We must also receive any
outstanding share certificates for those shares.
Written Instructions
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
o Your name,
o The Fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you're exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the evening
if preferred.
20 o Templeton Global Smaller Companies Fund, Inc.
PAGE
Signature Guarantees
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
Share Certificates
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up to
2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form.
In this case, you should send the certificate and assignment form in separate
envelopes.
Telephone Transactions
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
Templeton Global Smaller Companies Fund, Inc. o 21
PAGE
When you call, we will request personal or other identifying information to
confirm instructions are genuine. We will also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
Trust Company Retirement Plan Accounts. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
Account Registrations and Required Documents
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Joint Ownership. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or
more owners, all owners must sign instructions to process transactions and
changes to the account. Even if the law in your state says otherwise, you will
not be able to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
Trusts. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
22 o Templeton Global Smaller Companies Fund, Inc.
PAGE
Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- -----------------------------------------------------------------------
<S> <C>
CORPORATION Corporate Resolution
- -----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners, or
2. A certification for a partnership agreement
- -----------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- -----------------------------------------------------------------------
</TABLE>
Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both
dealers must have an agreement with Distributors or we will not process the
transfer. Contact your Securities Dealer to initiate the transfer. We will
process the transfer after we receive authorization in proper form from your
delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
Electronic Instructions. If there is a Securities Dealer or other
representative of record on your account, we are authorized to use and execute
electronic instructions received directly from your dealer or representative
without further inquiry. Electronic instructions may be processed through the
services of the NSCC, which currently include the NSCC's "Networking,"
"Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's PCTrades
II(TM) System.
Tax Identification Number
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
Templeton Global Smaller Companies Fund, Inc. o 23
PAGE
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
Keeping Your Account Open
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is $50 or less, except for investors
under categories (d), (e), (j), and (l) under "Opening Your Account." We will
only do this if the value of your account falls below this minimum because you
voluntarily sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of your
account to the required minimum amount of at least $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
Automatic Investment Plan
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to account application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
Systematic Withdrawal Plan
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum
payment amount for each withdrawal must be at least $50. For retirement plans
subject to mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
24 o Templeton Global Smaller Companies Fund, Inc.
PAGE
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. You will generally receive your payment by the
end of the month in which a payment is scheduled. When you sell your shares
under a systematic withdrawal plan, it is a taxable transaction.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us in
writing at least seven business days before the end of the month preceding a
scheduled payment. Please see "How Do I Buy, Sell and Exchange Shares? -
Systematic Withdrawal Plan" in the SAI for more information.
Statements and Reports to Shareholders
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.
Brokers and Dealers and Plan Administrators
You may buy and sell Fund shares through registered broker-dealers. The Fund
does not impose a sales or service charge but your broker-dealer may charge you
a transaction fee. Transaction fees and services may vary among broker-dealers,
and your broker-dealer may impose higher initial or subsequent investment
requirements than those established by the Fund. Services provided by broker-
dealers may include allowing you to establish a margin account and borrow on
the value of the Fund's shares in that account. If your broker-dealer receives
your order before pricing on a given day, the broker-dealer is required to
forward the order to the Fund before pricing closes on that day. A broker-
dealer's failure to timely forward an order may give rise to a claim by the
investor against the broker.
Third party plan administrators of tax-qualified retirement plans and other
entities may provide sub-transfer agent services to the Fund. In such cases, the
Fund may pay the third party an annual sub-transfer agency fee that is not
greater than the Fund otherwise would have paid for such services.
Templeton Global Smaller Companies Fund, Inc. o 25
PAGE
Institutional Accounts
Institutional investors will likely be required to complete an institutional
account application. There may be additional methods of opening accounts and
purchasing, redeeming or exchanging shares of the Fund available for
institutional accounts. To obtain an institutional application or additional
information regarding institutional accounts, contact Franklin Templeton
Institutional Services at 1-800/321-8563 Monday through Friday, from 9:00 a.m.
to 5:00 p.m. Eastern time.
Availability of These Services
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
What If I Have Questions About My Account?
If you have any questions about your account, you may write to Investor
Services, P.O. Box 33030, St. Petersburg, FL 33733-8030. The Fund and
Distributors are also located at this address. You may also contact us by phone
at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN
TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ------------------------------------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236 9:30 a.m. to 5:30 p.m.
(Saturday)
Retirement Plans 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
26 o Templeton Global Smaller Companies Fund, Inc.
PAGE
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 Act - Investment Company Act of 1940, as amended.
Board - The Board of Directors of the Fund.
CD - Certificate of deposit.
Class I, Class II and Advisor Class - The Fund offers three classes of shares,
designated "Class I," "Class II," and "Advisor Class." The three classes have
proportionate interests in the Fund's portfolio. Class I and Class II differ,
however, primarily in their sales charge structures and Rule 12b-1 plans.
Advisor Class shares are purchased without a sales charge and do not have a Rule
12b-1 plan.
Code - Internal Revenue Code of 1986, as amended.
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. Regardless of when during the month you
purchased shares, they will age one month on the last day of that month and
each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Directors."
Franklin Funds - The mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government Securities Trust.
Franklin Templeton Funds - The Franklin Funds and the Templeton Funds.
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries.
Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds.
FT Services - Franklin Templeton Services, Inc., the Fund's administrator.
Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing agent and transfer agent.
Templeton Global Smaller Companies Fund, Inc. o 27
PAGE
IRS - Internal Revenue Service.
Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
Moody's - Moody's Investors Service, Inc.
Mutual Series - Franklin Mutual Series Fund Inc., a member of the Franklin
Group of Funds, formerly the Mutual Series Fund Inc. Each series of Mutual
Series began offering three classes of shares on November 1, 1996, Class I,
Class II and Class Z. All shares sold before that time are designated Class Z
shares.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation.
NYSE - New York Stock Exchange, Inc.
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge, if applicable. The
maximum front-end sales charge is 5.75% for Class I and 1% for Class II.
Advisor Class has no front-end sales charge.
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information.
S&P - Standard & Poor's Corporation.
SEC - U.S. Securities and Exchange Commission.
Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
28 o Templeton Global Smaller Companies Fund, Inc.
PAGE
Templeton Funds - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund.
TICI - Templeton Investment Counsel, Inc., the Fund's investment manager, is
located at Broward Financial Centre, Fort Lauderdale, FL 33394-3091.
Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly-owned subsidiaries of Resources.
U.S. - United States.
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly-owned
subsidiaries of Resources.
Templeton Global Smaller Companies Fund, Inc. o 29
PAGE
